Friday, June 5, 2009

Black Rock, Black Hat?

"BlackRock helped shape the government's toxic-asset plan, which critics have said helps vulture investors buy assets on the cheap while exposing taxpayers to the bulk of the losses if the investments sour. Meantime, BlackRock continues to manage $132 billion in mortgage assets, some of which have defaulted. BlackRock's multiple hats put it in the enviable position of having influence on setting the prices of both the assets it is buying and selling. 'BlackRock is too close to the problem to be objective,' says Janet Tavakoli, a former Wall Street derivatives trader and now president of a financial-consulting firm. 'One should question how much they are part of the problem.' ... 'We have a two-decade record of managing conflicts, which is why we have been hired by many global institutions and governments,' says Mr. [Laurence] Fink, a former Wall Street trader. 'Our clients trust us.' ... Ben Bernanke ... also wrote that the Fed may and has audited BlackRock's compliance with [confidentiality] rules and its methods for valuing securities. ... Mr. Fink's Rolodex reaches deep into Wall Street and Washington. He speaks frequently with Timothy Geithner, Treasury Secretary and former New York [Fed] president. It was Mr. Geithner who asked him to value the assets at Bear Stearns and AIG, among other things. ... Mr. Fink's ties to Wall Street and Washington were evident in the collapse and rescue of Bear Stearns last year. As the securities firm teetered in mid-March, JPMorgan Chase & Co. asked Mr. Fink to value Bear Stearns's assets to help the big bank formulate a buyout offer. ... The request: to switch gears and help the Fed choose which of those Bear assets could be used to collateralize a $29 billion government loan as part of the deal. Several months later, Mr. Fink paved the way to be involved in the problems at AIG. ... BlackRock also was involved in the fallout from the bankruptcy of Lehman Brothers in September. Ken Wilson, an adviser to former Treasury Secretary Henry Paulson, says Mr. Fink was the first executive he talked to after the Lehman collapse who had a strong understanding of what was going on in the money markets. 'People talk to him because he is substantive,' says Mr. Wilson, a former Goldman Sachs Group Inc. [GSG] partner now in private practice. ... In September Mr. Fink called Morgan Stanley [MS] CEO John Mack about his pending investment from Mitsubishi UFJ Financial Group. BlackRock, which says it was subsequently hired by Mitsubishi, provided a financial opinion on [MS's] balance sheet. The opinion helped seal the deal. ... In its latest role, BlackRock has advised the government on how to craft what is called the Public-Private Investment Program", my emphasis, Liz Rappaport and Susanne Craig at the WSJ, 19 May 2009.

Aren't you pleased that a Wall Street "insider" like BlackRock is working in the public interest? That it has private clients and helps draft public policy? Will PPIP help BlackRock's private clients? That its tentacles have GSG all over them? Why would Mitsubishi need a "financial opinion" on MS's balance sheet? Where's the PCAOB? What did MS pay Deloitte & Touche $47 and $52 million in 2007 and 2008 for? Is BlackRock a CPA firm too? BlackRock should be removed from any further contact with the Treasury or Fed. Forcibly.


Anonymous said...

Noted. Uh yes... way too close.

Jr Deputy Accountant said...

BlackRock is the PwC of toxic assets.